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Reaffirmation agreements must not impose an undue burden on the debtor or the debtor's dependents and must be in the debtor's best interest. An agreement to reaffirm a debt may be canceled at any time before discharge or within sixty days from the date the reaffirmation agreement is filed with the court, whichever is later. If a debt is reaffirmed and the debtor fails to make the payments required in the reaffirmation agreement, the creditor can take action to recover any property that was given as security for the loan and the debtor may remain personally liable for any remaining unpaid portion of the debt.
Reaffirmation agents, who work for individual creditors, are sometimes present at the 341 (a) meeting and will approach debtors to urge them to reaffirm their debts. A debtor has no obligation to speak with these agents, and, if the debtor is represented by counsel, their attorney should be present at any such discussions.
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email:info@gabriellaw.com
Other Bankruptcy Options
Debtors have a choice when deciding what chapter of the Bankruptcy Code will best suit their needs. Even if a debtor has already filed for relief under chapter 7, it may be possible to convert the case to a different chapter.
As described above, chapter 7 is the liquidation chapter of the Bankruptcy Code. Under chapter 7, a trustee is appointed to collect and sell, if economically feasible, all of the debtor's property that is not exempt from the bankruptcy proceeding.
Chapter 11 is the reorganization chapter, which is most commonly used by businesses but is also available to individuals. Creditors vote on whether to accept or reject a proposed repayment plan, which also must be approved by the court. While the debtor normally remains in control of the assets, the court can order the appointment of a trustee to take possession and control of the estate.
Chapter 12 offers bankruptcy relief to those who qualify as family farmers. Family farmers must propose a plan to repay their creditors over a three-to-five year period, which must be approved by the court. Plan payments are made through a chapter 12 trustee, who also monitors the debtor's farming operations during the pendency of the plan.
Finally, chapter 13 generally permits individuals to keep their property by repaying creditors out of their future income. The debtor must pay the chapter 13 trustee the amounts set forth in their plan. Chapter 13 is only available to individuals with regular income whose debts do not exceed $1,000,000 ($250,000 in unsecured debts and $750,000 in secured debts).
Risk of Civil and Criminal Penalties
Debtors who obstruct the efforts of the trustee risk civil and criminal penalties, which can include Fines of up to $250,000 and prison terms of up to 5 years. Federal bankruptcy crimes include knowingly and fraudulently concealing assets, making false oaths, declarations or accounts, presenting a false claim against the estate, transferring or concealing property, and destroying or concealing books, records or documents.
Role of the United States Trustee
The United States Trustee is responsible for overseeing the administration of all bankruptcy cases. The United States Trustee appoints and supervises the chapter 7 trustees as well as monitors compliance by debtors
